Canada’s SR Telecom To Acquire Netro

SR Telecom, a Canada-based wireless telecommunications company plowed forward this week with plans to acquire and merge with Netro Corp. , a San Jose, Calif.-based provider of fixed broadband wireless systems.

SR Telecom, which trades on the Toronto Stock Exchange under the symbol SRX, sells and installs point-to-multipoint fixed wireless access systems for worldwide telephone and data network operators.

The deal is worth an estimated $121 million in U.S. currency, and if approved, a wholly owned subsidiary of SR Telecom will merge with Netro.

According to a Netro spokesperson, it has not yet been determined if layoffs will result from the acquisition/merger or whether Netro’s San Jose offices will be moved to Montreal, Canada, where SR Telecom is headquartered.

SR Telecom is still formulating an integration plan, said the spokesperson

Since the beginning of the year, Netro has been in limbo because of the worldwide slump in the telecommunications industry.

In November of 2002, the company announced a major restructuring and cost-cutting strategy and retained the services of Goldman, Sachs & Co. to help the company’s board of directors evaluate strategic alternatives.

Netro’s fourth quarter report in February of this year was far less than expected, with revenues of $2.9 million, a 17.5 percent decrease from the third quarter of 2002 and a 54.9 percent decrease from the same quarter in 2001.

According to reports, the boards of both SR Telecom and Netro have approved the acquisition deal, although approval from Netro shareholders is still pending.

Netro shareholders stand to gain a comfortable premium over the company’s closing price on the Nasdaq Wednesday as well as 43 percent ownership of SR Telecom’s common shares.

According to SR Telecom, a group of shareholders have already agreed to vote in favor of the acquisition, and SR Telecom is confident the deal will close by the beginning of the third quarter.

If approved, SR Telecom stands to gain tremendously.

Over the past decade, SR Telecom has grown from a supplier of hardware systems
to supplying a global marketplace with wire and cable network alternatives that provide voice and data transmission between a central office and subscribers.

The addition of Netro’s product line will boost SR Telecom’s status as a major provider of carrier-class fixed wireless access solutions. This at a time when many analysts are expecting significant market growth as service providers look to broadband wireless alternatives for servicing areas that traditional wireline networks cannot reach.

According to Ovum Research, the market for broadband fixed wireless access is expected to grow from 1 million lines in 2003 to 16 million lines by 2008.

Two of Netro’s most notable wireless products have been AirStar, a high-capacity, carrier-class fixed broadband wireless access solution designed to solve last-mile bottlenecks, and 3.5 GHz Angel technology for bridging local access bandwidth gaps.

Both AirStar and Angel focus on voice and high-speed data delivery to end-users, residential customers, business users, and cellular base stations.

According to Netro, AirStar has been deployed in more than 30 countries and Angel has been deployed to 47,000 end users in 10 U.S. markets.

Netro’s Angel technology was acquired from AT&T Wireless in 2002 and is one of the first high-capacity systems using Orthogonal Frequency Division Multiplexing (OFDM), which enables it to deliver high-quality voice and data services in the 1.9, 2.3, and 3.5 GHz bands.

According to SR Telecom’s David Adams, the addition of Angel and AirStar to SR’s product portfolio will play a significant role in doubling SR Telecom’s revenues, which have already increased by 28 percent to $181 million in 2002 compared to $141.6 million in 2001.

Additionally, the acquisition/merger will richen SR Telecom’s coffers by adding a consolidated cash supply of approximately $75 million in Canadian currency, or $47 million U.S.

SR Telecom will also become heir apparent to a NASDAQ listing and become an SEC registrant.

The next stage in the acquisition is pending approval from the Securities and Exchange Commission, after which proxy statements will be mailed to shareholders and a meeting of the board of directors will be scheduled for early July, said a spokesperson.

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